Financial Auditing Session 6 PDF

Last Update 01/09/24 FINANCIAL AUDITING - Audrey CHEREF - page 137  Last Update 01/09/24 FINANCIAL AUDITING - Audrey CHEREF - page 138  Last Update 01/09/24 I. CONTROL OF INTERNAL CON...

Last Update 01/09/24 FINANCIAL AUDITING - Audrey CHEREF - page 137  Last Update 01/09/24 FINANCIAL AUDITING - Audrey CHEREF - page 138  Last Update 01/09/24 I. CONTROL OF INTERNAL CONTROL To certify the financial statements, statutory financial auditors identify significant risks and major internal control weaknesses likely to have a material impact on accounting and financial information Internal control assessment is a mean to issue an opinion not an objective. Procedure controls = tests performed by the auditor to obtain sufficient appropriate audit evidence about the effectivenessFINANCIAL of controls. AUDITING - Audrey CHEREF - page 139  Last Update 01/09/24 II. INTERNAL CONTROL SYSTEM ASSESSMENT System understanding Preliminary assessment Internal Control assessment PHASE YES NO II Possibility of relying on the controls Function check Design risk analysis NO Reliable function Operational risk analysis YES Final assessment of Opinion & internal control recommendations FINANCIAL AUDITING - Audrey CHEREF - page 140  Last Update 01/09/24 III. PROCEDURE TESTING GOAL assess the effectiveness of the controls designed and implemented by the entity to prevent, detect or correct material misstatements in the financial statements. Confirm understanding of internal control. Evaluate internal control design. Ensure that internal controls are always operating effectively. FINANCIAL AUDITING - Audrey CHEREF - page 141  Last Update 01/09/24 IV. PHASES & TESTING TYPES Organization Getting to know Flow tests understanding procedures Preliminary Checking the Compliance assessment of functioning of tests procedures procedures Final Ensure that strength Continuity controls are applied assessment of & weakness controls & revealing procedures creates a risk tests FINANCIAL AUDITING - Audrey CHEREF - page 142  Last Update 01/09/24 V. PROCEDURE TESTING TYPES Flow test or walk consists of following the flow of a limited through test number of transactions through the information system from its point of origin to its presentation in the financial statements, to acquire the knowledge and understanding of the information systems Compliance or consists of verifying on a limited number of existence test transactions, that internal control procedures have been correctly applied. Continuity or used to check, on a sample basis, that permanence test theoretical strength controls are always applied used to check, on a sample basis, that Revealing test theoretical weakness controls are generated a risk FINANCIAL AUDITING - Audrey CHEREF - page 143  Last Update 01/09/24 VI. PROCEDURE TESTING TOOLS & TECHNIQUES Strengths & Information Organization understanding weaknesses checking checking Physical Request for Collation of Flow chart observation third-party documents confirmation Segregations Samplings of duties Internal control Re-execution (oriented, questionnaires of controls statistical) Trail & interviews Comparison between Procedures guides, manuals & theory & job description practice Control point Previous audit reports method FINANCIAL AUDITING - Audrey CHEREF - page 144  Last Update 01/09/24 FINANCIAL AUDITING - Audrey CHEREF - page 145  Last Update 01/09/24 I. DEFINITION & PRINCIPLE Document and information circulation diagrams 1 Identifying the process to be represented 2 Identifying activities 3 Identifying the players: diagram column 4 Identifying documents 5 Identifying flows: activity inputs and outputs FINANCIAL AUDITING - Audrey CHEREF - page 146  Last Update 01/09/24 II. COMMON SYMBOLS SYMBOLS & MEANING Processus or operation Decision: alternative → yes/no, accept/reject Document Connection line Computer system or application Link to page Off-page link Terminator Annotation FINANCIAL AUDITING - Audrey CHEREF - page 147  Last Update 01/09/24 III. EXAMPLE: EXPENSES REIMBURSEMENT Applicant N+1 Head of Management control Accounting CFO department Yes Fill-in form Validated and No signed expense Traveldoo report + Original invoices Validation Scans + Invoice Amount Yes No HD + N+1 checking validation Expense Yes Validated reports with No expense report No alerts with alerts Yes Validation Recording Validation expense Rejected reports expense N+1 Validated report No Yes expense Payment of report verified with alerts Preparing for Validated invoices payment expense report Payment Final file: validation invoices & validated No expense report Yes Payment Payment FINANCIAL AUDITING issue CHEREF - page 148 - Audrey  Last Update 01/09/24 AND NOW PLAY ON ! 1. You have composed a group of students on Boostcamp for the last group work. 2. Present the flow chart for the identified process on the following 2 slides. 3. Identify the strengths & weaknesses of the procedure. 4. Upload your work on Boostcamp before the end of the session. FINANCIAL AUDITING - Audrey CHEREF - page 149  Last Update 01/09/24 NPO: SUPPLIER INVOICE PAYMENT Identifying the process to be represented: paying invoices 1 to suppliers Identifying activities: Receiving invoices, Posting 2 invoices, Validating invoices, Checking invoices, Preparing payment, Issuing payment Identifying the players: Supplier, Mailing Department, 3 Accounting Department (Accountant, CFO), Applicant Identifying documents: Invoice, Purchase order, Receipt 4 slip Identifying flows: invoice, dated, entered, verified, 5 validated, reconciled, payment FINANCIAL AUDITING - Audrey CHEREF - page 150  Last Update 01/09/24 NPO: SUPPLIER INVOICE PAYMENT Players Inputs Activities Outputs Mail service Invoice Receiving invoices Dated invoice Invoice with date of Booked Accounting Invoice booking receipt invoice Validated Recorded invoice, invoice Applicant purchase order and Invoice validation otherwise receiving order procedure A Verified Invoice verification invoice Accounting Validated invoice Payment preparation otherwise procedure A CFO Verified invoice Payment issue Payment FINANCIAL AUDITING - Audrey CHEREF - page 151